Market capitalisation (short: "market cap") is the total market value of allof a .
It is calculated by multiplying the number of outstanding shares by the share price, and is thus a strong indicator of a company’s. Market cap is generally expressed in but in Europe may be recorded in or sterling.
As an example, a company that has 50 million shares with a share value of $75 would have a market cap of $3.75 billion (50 million x $75).
The total (also: outstanding) shares include not just thebut also preferred shares, which are not usually traded on the .
Many online brokers offer the option to trade the stocks and shares of public companies:
Why the market capitalisation in trading matters
Market capitalisation is not the only indicator of a company’s value, but it is an important one as it’s a fairly solid calculation of the size of its, and this may be viewed as a sign of its success as a company.
It should not be taken as the sole indicator of company's health, as many factors can affect a company’s growth, some of which will be outside the control of the company or.
On the trading floor, companies are rated according to the size of their market capitalisation, which determines which indices they may be listed on. The amounts for listing are usually:
- Large-cap companies have equity of at least $10 billion
- Mid-cap companies have equity of $2-10 billion
- Small cap companies have equity of less than $2 billion
Cap size therefore matters when consideringin or trading shares as it can depict how a company has allocated its assets and also help calculate the risk/reward ratio.
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